 Welcome to this Farm Accounting 101 presentation on Sample Accounting Entry Number 3. Buying a piece of farm equipment with a cash down payment, equipment trade in, and financing the balance due. Using an Excel spreadsheet. I'm Robert Page, Regional Extension Agent and Member of the Farm and Agribusiness Management Team with the Alabama Cooperative Extension System at Auburn University. As we have said in earlier presentations, the Farm Accounting 101 series is intended to help Alabama producers to improve their farm financial literacy. Farmers, like any other small business, have the same basic financial transactions every year, so we study typical checks and deposits. We also learn the accounting principles behind these checks and deposits. Today's presentation shows a typical farm transaction of purchasing a piece of farm equipment with cash down, equipment trade in, and financing the balance due over time. Now let's review Sample Accounting Entry 3. Buying a piece of farm equipment with a cash down payment, equipment trade in, and financing the balance due. In this example, the farmer bought a used New Holland T4.75 tractor for $35,500 from the local implement dealer. How was payment made? The farmer wrote a check for $3,550, which was a 10% down payment on the tractor purchase. The local implement dealer offered a trade-in allowance of $18,000 on the farmer's current tractor. The balance due of $13,950 was financed for 24 months through the farmer's ag lender. The big question is whether we can enter all this information correctly into our Schedule F Excel spreadsheet. The answer is no. We cannot. Let's take a look at what we can enter and why we are limited. So I'm going to change the view from this PowerPoint screen to our Excel spreadsheet. Let's begin taking a look. This transaction is dated February 22, 2019 and we begin with a check written for the down payment on check number 2147. The check is made to the local equipment dealer for the tractor and the down payment, which is entered at $3,550 under the column D. Now let's go all the way over. There's the $3,550, which is listed under a column AB. And this transaction is in balance. However, this is not the end of the story. Therefore, we have to look at the more complicated accounting transaction to realize this is all that we can enter on this Excel spreadsheet at this point in time. If you're not familiar with the Excel spreadsheet I'm currently using and you would like to download it, please visit the ACES website at www.aces.edu Then select the topic tabs entitled Farming and then Farm Management to find the article entitled Using an Excel spreadsheet for Farm Financial Records. There is a link to this spreadsheet embedded in the article. Now let's briefly review the accounting entry for this check payment we entered into Excel. This is a compound entry that requires three documents to calculate correctly. They are. Number one, the Farm Equipment Dealer invoice for the purchase of the New Holland T4.75 tractor. Number two, a copy of the finance contract with the ag lender to verify the purchase price amount financed and length of contract. Number three, a copy of the fixed asset listing from the tax preparer to determine both original purchase price of the old tractor and accumulated tax depreciation taken on the old tractor. Reminder, this compound entry uses the other cash uses column on the expense sheet and is carried over into other cash uses box on the profit and loss sheet on the Excel spreadsheet. Now back to accounting. Like all accounting entries, debit and credit entries must be in balance. In this example, total debits and credits are $57,800. Let's briefly review it. Line one, machinery and equipment for fixed assets is debited for the total amount of the new tractor, $35,550. Line two, cash farm checking is a current asset and it decreases with a credit entry reflecting the dollar amount of the check written for the down payment. Then in line three, we have the loan, which is a new loan and a long term liability for our ag lender. The amount of the loan is $13,950. Then we have the old tractor original purchase and the old tractor is on the fixed asset schedule and that old tractor is credited for $26,000, which was the original purchase price. Then we credit, excuse me, debit, the accumulated depreciation for the old tractor, which is also a contra fixed asset with a debit of $22,300. Then we have the gain or loss on the old tractor sale, which is recorded to other income and we have a gain of $14,300. Thus, $57,800 of debit, $57,800 in credits. The entry is in balance, but understand that this is a compound entry and requires three different documents to calculate correctly. We close by saying thank you for watching today's presentation on sample accounting entry number three, buying a piece of farm equipment with a cash down payment equipment trade in and financing the balance due using an Excel spreadsheet. This segment of the Farm Accounting 101 series is produced by the Alabama Cooperative Extension System Farm and Agribusiness Management Team at Auburn University in Auburn, Alabama. For additional information on the farm and agribusiness management team and other ACES programs, please visit our website at www.aces.edu.